Troubled Texas firm gives big bucks to Lone Star Republican lawmakers

A Texas-based firm that was fined by regulators for unlawful practices threatening the integrity of the municipal securities market gave handsomely to Republican lawmakers as the U.S. House and Senate eyed bank reform measures.

The lawmakers and candidates received contributions from officials at Southwest Securities Inc. of Arlington, which was censured and fined $500,000 this week by the Financial Industry Regulatory Authority, or FINRA.

The campaign contributions came as Congress weighed Wall Street reform and other regulatory changes following the economic collapse and the bank bailout.

“Anytime an entity or executives are spending on campaign contributions or lobbying, the antennae should go up,” said Sheila Krumholz with the Center for Responsive Politics, a non-partisan watchdog group that tracks money in politics.

“This is not altruistic giving,” she said.

Southwest Securities agreed to halt the practice of paying former Texas municipal securities officials to obtain underwritings from Texas cities, FINRA announced in an agreement reached with the securities firm.

In a statement, James Ross, Southwest Securities chief executive officer, said the “settlement is in the best interest of our firm, our shareholders and our clients.”

Southwest Securities is one of the nation’s largest securities firms, and the largest in Texas. It is a subsidiary of SWS Group, which sells securities, insurance and other investment products.

The firm’s officers have actively contributed to Republican lawmakers in Texas, according to Federal Election Commission records.

Sen. Kay Bailey Hutchison, R-Texas, received $11,700 in campaign contributions from officers with the firm over the past two election cycles, according to analysis by the Center for Responsive Politics. Hutchison is a member of the Senate Banking Housing and Urban Affairs Committee, which oversees banking and securities regulation.

Southwest Securities officials gave Dallas Rep. Jeb Hensarling, who sits on the House Financial Services Committee, $6,600 in past cycles.

The firm also contributed to Sen. John Cornyn as well as Reps. Pete Sessions and Sam Johnson of Dallas, Ralph Hall, of Rockwall and Mike Conaway of Midland.

Last year, Rep. Francisco Canseco, a San Antonio banker, received $1,250 from the company. Canseco serves on House Financial Services Committee but was not in office when he received the contributions.

Whether it be contributions to lawmakers or candidates, Krumholz said firms give to influence the political process.

“These groups are not in the business to give this money away,” she said. “You can be sure they are giving for a legislative agenda.”

Although Southwest Securities gave only to Republicans in Texas, the securities industry was the fourth largest contributor to all congressional candidates in the 2010 election cycle. Industry sources gave $92 million in federal races, splitting the money almost evenly among Republicans and Democrats, who still control the Senate.

With Wall Street reform being a big focus of Congress in recent years, financial industry contributions have increased, Krumholz said, reviewing data compiled on the center.

Southwest Securities, meanwhile, has run afoul of regulators in the past.

A year ago, the Dallas-based firm paid a $470,147 fine after the Securities Exchange Commission found it violated rules by co-underwriting bond deals in Massachusetts while contributing to the campaign of the state’s treasurer.

The SEC found that Southwest Securities violated on municipal securities rule on political contributions.